A secured debt is linked to your assets, such as your home for a mortgage; the lender can foreclose on your home if you stop making payments. Unsecured debt, such as credit card debts and medical bills, is not tied to your assets. If you default on your payments for an unsecured debt, the creditor can take certain measures, including a wage garnishment, to recover the unpaid amount.
Determination
All states except Pennsylvania, North Carolina, South Carolina and Texas allow creditors to garnish wages for unpaid debts. Specifically, if you are paid in a state that allows wage garnishments, creditors can garnish your wages. If your state does not allow wage garnishments, the creditor can obtain approval from the court to garnish monies deposited into your bank account.
Process
If your state allows creditors to garnish wages, the creditor must first file a lawsuit against you. He must win the suit, in which case the judge grants him a judgment; thereafter, he applies for a wage garnishment with the said court. If your state does not allow wage garnishments and you owe an out-of-state creditor, in most cases, the creditor can seek a judgment and a wage garnishment in her state, if the state allows it, and garnish your wages from there. If the creditor is in the same state that you live in, that state does not allow wage garnishments, and you are paid in a state that allows wage garnishments, the creditor can seek a judgment in your home state, domesticate it in the foreign state and seek wage garnishment there.
Withholding Limit
Federal law limits the amount of your pay that your employer can deduct for an ordinary wage garnishment, such as for an unsecured debt. Your employer can withhold no more than the lesser of the total by which your weekly disposable income exceeds 30 times the federal minimum hourly wage or 25 percent of your disposable income -- your pay after legally required deductions. Your state might have different limits; your employer is supposed to use the smaller amount.
Solutions
If you're having financial difficulties that are preventing you from making your payments as promised, contact the creditor immediately. He might be able to offer you a lower payment and stop your account from being submitted to a debt collector. If the creditor sues you, respond to the lawsuit if you do not agree to it -- this gives you a chance to present your side of the case to the judge. If the wage garnishment is causing you financial hardship, contact the issuing court for its procedures on filing a hardship claim, which can result in a lower garnishment amount or the judge temporarily setting aside the order.
Considerations
Each state has a statute of limitations that dictates the time frame in which a creditor can seek judgment and execute it via wage garnishment.
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